Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C = 300 +0.75(Y-T) Suppose further that investment spending is fixed at 1= 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y = (Round your response to two decimal places.) C=(Round your response to two decimal places.) S=(Round your response to two decimal places.) Now, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 30 to a new fixed level of 170. Determine the value of the tax multiplier. Tax multiplier = (Round your response to two decimal places and include a minus sign if necessary)

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Question

Aa30 

Economics 

 

Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed
taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following
consumption function.
C = 300 +0.75(Y-T)
Suppose further that investment spending is fixed at 1 = 200.
Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S.
Y = (Round your response to two decimal places.)
(Round your response to two decimal places.)
(Round your response to two decimal places.)
Now, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 30 to a new fixed level of 170. Determine the value
of the tax multiplier.
Tax multiplier = (Round your response to two decimal places and include a minus sian if necessarv.)
C=
S=
Transcribed Image Text:Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G = 250 and fixed taxes of T = 200. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function. C = 300 +0.75(Y-T) Suppose further that investment spending is fixed at 1 = 200. Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S. Y = (Round your response to two decimal places.) (Round your response to two decimal places.) (Round your response to two decimal places.) Now, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 30 to a new fixed level of 170. Determine the value of the tax multiplier. Tax multiplier = (Round your response to two decimal places and include a minus sian if necessarv.) C= S=
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